| WASHINGTON, April 21
WASHINGTON, April 21 The assets held by state
and local government pension funds rose to $2.93 trillion in
2010, a 35 percent increase from their lowest point during the
financial crisis, two national associations said on Thursday.
"Rising capital markets, strong long-term investment
returns, and actions by many states to preserve or restore the
affordability and sustainability of their pension plans have
all played a role," said the National Association of State
Retirement Administrators and National Council on Teacher
Retirement in a special brief on the funds' improving health.
Public pensions rely on two major sources for funding --
employee and employer contributions and investment returns.
Although the government contributions have recently been the
center of political debates in many states, investment assets
play a key role in keeping promises made to public employees by
providing more than half the funds' revenues.
The groups found that state and local pension trusts have
regained much of the asset value they lost during the 2008
Over the last 25 years, the median public pension fund has
had an annualized investment return of 8.8 percent, the groups
found. Over the last year, it had a return of 13.1 percent.
Typically, when returns are low, governments make larger
contributions to the pension funds. But, amid some of the worst
budget crises in recent memory, state and local governments cut
deposits just as the stock market plunged.
Currently pension funds are unable to pay for future
retirees' benefits, with estimates of the shortages ranging
from $700 billion to $3 trillion.
The groups warned many current calculations of funds' gaps
include data from the market decline, but not the recovery.
"Reports that overlook these gains in state and local
government pension trust assets since mid-2009 can be
misleading," they said.
Next week, the Pew Center on the States will update its
report from last year that estimated a $1 trillion shortfall in
pension funding, but relied on data from before the financial
(Editing by James Dalgleish)